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Long-Short Investment Funds – Trading and Selling to Minimize Risk

 

Long-Short Investment Funds
Image: investopedia.com

Engaging as a partner with Boston-based Granite Point Capital, Scott Bushley guides the financial and operational activities of a hedge fund that provides diversified financial solutions. A fundamental approach of Scott Bushley’s firm is employing long-short investment strategies, with a focus on US companies that are mispriced in the markets.

Long-short funds are a specific type of hedge fund that focus on long positions in undervalued investments expected to increase in value. The invested equity is also employed as margin in opening a short position, which involves selling securities that are not owned.

The cash received from shorting the assets is placed into further long positions, such that the investment dollars at hand are leveraged. It also provides the fund manager with extra breadth in analyzing complex situations and tailoring approaches to exact market dynamics.

Another advantage of the long-short fund approach is that it is market neutral. Through selling and buying, the fund manager can avoid overexposure in volatile situations where upward and downward swings are common. Although this helps minimize risk for the investor, it can limit short-term returns to some extent.